Tax treatment of computer software

Category Tax treatment Comments

Software acquired where Write-off over 1 year The purchaser has no rights other
taxpayer is granted the than the right to use the software.
right to use only (Section 19A(2))
It may be acquired separately
from the computer hardware or
together with the computer
hardware.

Examples of this category of

software are shrink-wrap software,
software downloaded from the
licensor’s designated network, site
license and software pre-installed
in the computer hardware.

Software acquired where Write-off over 5 years The rights acquired are more than
taxpayer possesses the just the right to use the software.
full economic and legal (Section 19B)
ownership It is a bundle of rights acquired
which allows the purchaser to,
amongst others, use the software,
modify the computer program or
exploit the copyright in the
software e.g. by granting license-
to-use to end-users.

Software which is Expenses incurred in The taxpayer possesses all the

developed, either in- the development of rights, interest and benefits
house or outsourced, by the software may be attached to the software.
taxpayer claimed under
Sections 14, 14D, 14DA
or 14E, subject to
meeting conditions.

If these conditions
cannot be met, write-
off over 1 year (Section
19A(2))